Choosing the correct clearance for a sleeve bearing involves consideration of the speed and load, as well as the geometry and lubricant. You mention blackened oil, but you do not mention whether the babbitt was damaged. Using 0.001 in/in works very well for some applications. Other designs use larger clearances, some smaller.
You also mention replacing the babbitt with some other material. This would normally be done due to a load or temperature requirement which exceeds that of babbitt. Your note implies that the bearing had been repaired, implying that it had worked successfully for some time. If so then some detail of the bearing bore, including the clearance, could be responsible for the apparent burning of the lubricant. There may also have been coincident changes to the machine, lubricant, or bearing design which are significant.
Can you provide more information on the bearing application and any damage to the bearing?
-- Lyle